Professional Indemnity Insurance

Why Do Technology Businesses Require Professional Indemnity Insurance?

30/04/2012 in Business, Professional Indemnity Insurance

Information technology is the backbone of many businesses yet is poorly understood by many. There’s often an enormous mismatch between client and professional expectation, probably unique to the information technology industry as regards professional indemnity claims. IT risks used to be treated as “Miscellaneous” but, as the industry has emerged into one of worldwide importance, so the understanding of the legal profession (and thus insurers) has led to a specific focus on IT in its own right.

Below are some professional indemnity claims that technology companies have faced:

• The insured designed a customer management software package. It was alleged that the software failed to comply with the agreed functionality. Amount paid: £350,000
• The insured configured an off-the-shelf software package for use by the client, and sold and installed associated hardware. There were serious difficulties following installation, leading to the client refusing to pay the balance outstanding and threatening a claim. Insurers paid the outstanding balance to the insured, avoiding the expense and reputational damage of a legal case. Amount paid: £55,000
• It was alleged that there were substantial deficiencies in the design of a software package, resulting in the system failing to meet the client’s requirements. Amount paid: £450,000.

For help and advice about insurance for your technology business please contact Scott Sayce, Head of Professions on 0118 9165 483, or complete one of our enquiry forms

Games Developers Insurance…….covered not covered, need a power up or an extra life??

12/04/2012 in Professional Indemnity Insurance

Being at the forefront of fun, interactive innovation leaves games developers particularly exposed to new areas of risk. For instance, often games developers contracts have ‘milestones’ within them and disputes as to whether these milestones have been met can trigger a breach of contract.

Therefore risks that games developers should consider insuring against include:

– Breach of a written contract
– Infringement of someone else’s intellectual property rights
– Legal action taken against you worldwide, including USA

Any of these areas can be potentially disastrous to a games developer and, given the rise in compensation culture, an increasingly likely occurrence.

Professional Indemnity Insurance covers you for liabilities that arise from the professional advice or services your organisation provides – helping to protect your reputation and giving you the peace of mind to concentrate on your business.

A specialist and expert approach

As a specialist broker for the games development industry we have the expertise to source bespoke insurance policies specially designed for this sector. We pride ourselves on understanding the unique requirements of games developers and how much this differs from other professions.

For help and advice about games developers insurance please contact Scott Sayce, Head of Professions on 0118 9165 483, or complete one of our enquiry form

Vicarious Liability and the Recruitment Industry

04/04/2012 in Professional Indemnity Insurance, Recruitment Industry Insurance

Increasingly, recruitment agencies are signing up to hiring clients’ terms of business, and more agencies have contracts of employment with temporary workers than ever before, particularly as a consequence of the agency workers regulations which came into effect on 1st October 2011. This increases the likelihood of recruitment agencies being deemed the employer of the temporary workers, and as such, increases their exposure to vicarious liability.

One example:

A recruitment agency supplied a construction project manager to a London local authority, who over the course of two years was accused of approving 17 false projects and defrauding the council out of a staggering £2.8m. The council argued they are not supervising nor employing the worker, and that the recruitment agency is responsible for the actions of the workers they supply and are suing the agency for their loss.

For help and advice about insurance for the recruitment and staffing sector please contact Scott Sayce, Head of Professions on 0118 916 5483, or complete one of our enquiry forms

Why Is Professional Indemnity Insurance Important To The Technology Industry?

03/04/2012 in Professional Indemnity Insurance

Information technology is the backbone of many businesses yet is poorly understood by many. There’s often an enormous mismatch between client and professional expectation, probably unique to the information technology industry as regards to professional indemnity claims. IT risks used to be treated as “Miscellaneous” but, as the industry has emerged into one of worldwide importance, so the understanding of the legal profession (and thus insurers) has led to a specific focus on IT in its own right.

Below are some professional indemnity claims that technology companies have faced:

• The insured designed a customer management software package. It was alleged that the software failed to comply with the agreed functionality. Amount paid: £350,000

• The insured configured an off-the-shelf software package for use by the client, and sold and installed associated hardware. There were serious difficulties following installation, leading to the client refusing to pay the balance outstanding and threatening a claim. Insurers paid the outstanding balance to the insured, avoiding the expense and reputational damage of a legal case. Amount paid: £55,000

• It was alleged that there were substantial deficiencies in the design of a software package, resulting in the system failing to meet the client’s requirements. Amount paid: £450,000.

Do not leave your business unprotected! For help and advice on Technology Professional Indemnity Insurance please contact Scott Sayce, Head of Professions on 0118 9165 483, or complete one of our enquiry forms

Do Technology Companies Need Professional Indemnity Insurance??

02/04/2012 in Professional Indemnity Insurance

Technology companies face unique risks and require specific insurance coverage’s to protect their business from financial loss. Technology professional indemnity insurance is a key element of risk management for a technology company in today’s world.

Typical reasons that professional indemnity claims are made against a technology company include:

• Programming errors
• Poor customer communication
• Problems with large integration/installation projects
• Development problems
• Problems with combining or integrating software or hardware components
• Customer changing project scope (often referred to as “project creep”)
• Turnover of key personnel
• Short cuts during testing
• Poor accounts receivable controls that require the tech company to sue their customer for fees owed and this results in a countersuit for negligence in the performance of the tech services/products
• Shortfall in externally furnished products or externally performed tasks

Typical allegations in litigation for professional indemnity:

• Negligence
• Breach of Contract
• Failure to Perform
• Breach of Warranty
• Misrepresentation
• Fraud
• Intellectual Property Rights Infringement

So the answer to the question is YES technology companies do have a need for professional indemnity insurance either by contractual requirement or simply to protect them from a legal landscape that is continuing to evolve.

If you operate in the technology industry and would like advice on or to discuss your professional indemnity requirements please contact Scott Sayce, Head of Professions on 0118 9165 483, or complete one of our enquiry forms.

The Increased Exposure To Risk For Technology Companies

27/03/2012 in Professional Indemnity Insurance

Being at the forefront of innovation leaves technology companies particularly exposed to new areas of risk. Frequently ones you may be unaware of, let alone think you can insure against. Risks such as:

– Breach of a written contract
– Infringement of someone else’s intellectual property rights
– A defamation claim (libel or slander)
– Legal action taken against you worldwide, including USA

Any of these areas can be potentially disastrous to a business and, given the rise in compensation culture, an increasingly likely occurrence.

Professional indemnity insurance covers you for liabilities that arise from the professional advice or services your organisation provides – helping to protect your reputation and giving you the peace of mind to concentrate on your business.

A specialist and expert approach

As a specialist broker for the technology industry we have the expertise to source bespoke insurance policies specially designed for the technology sector. We pride ourselves on understanding the unique requirements of the technology sector and how much this differs from other professions.

For help and advice about Technology Professional Indemnity Insurance please contact Scott Sayce, Head of Professions on 0118 9165 483, or complete one of our enquiry forms

Professional Indemnity Insurance……….Explained

22/03/2012 in Professional Indemnity Insurance

In a modern world we rely upon services provided by others and the increased use by business of outside consultants has increased the scope of the term “Professional”. A professional is now often regarded as any person who offers ‘specialist advice or service’ and not just people like Accountants, Solicitors or Architects. For example an IT, Media or Design and Construction company.

But how does liability arise?

The professional person must exercise whatever degree of skill and care is reasonably expected of any competent person in that profession at that time. If a person provides advice or a service to another and carries that work out negligently, they can and may be held legally liable for the consequences.

Claims made’ insurance

Professional indemnity is written on a “claims made” basis. This means that the policy covers claims made (and reported to insurers) during the currency of the policy period unlike most liability policies which cover the loss occurring during the currency of the policy.

A claim is generally notifiable under a PI policy when the insured first becomes aware of a circumstances that could lead to a claim – this could be anything from a verbal criticism to receipt of a written statement of claim. The interpretation of when this situation occurs is the source of frequent policy disputes between the insurer and insured. If in doubt notify insurers and let them decide if the matter is a notifiable event.

If you have a question about professional indemnity, whether you are a start-up or multinational organisation, Please contact Scott Sayce, Head of Professions on 0118 9165 483 , or complete one of our enquiry forms.

Technology Insurance…….expert to expert!

05/03/2012 in Professional Indemnity Insurance

Many brokers and insurers claim to be experts in the field of technology insurance. However, The majority of these specialists have barely scratched the surface as to what is required.

“ You’re Experts in your field, therefore you deserve experts in our field who understand the exposures you face on a daily basis.”

We have an immature legal landscape currently, and this is constantly evolving. Many technology products are state of the art with capabilities not even conceived when most insurers created their policies. That is why technology companies require specialist insurance.

Below are some genuine examples of typical things that could go wrong for an IT organisations

• The insured designed a customer management software package. It was alleged that the software failed to comply with the agreed functionality. Amount paid: £350,000

• The insured configured an off-the-shelf software package for use by the client, and sold and installed associated hardware. There were serious difficulties following installation, leading to the client refusing to pay the balance outstanding and threatening a claim. Insurers paid the outstanding balance to the insured, avoiding the expense and reputational damage of a legal case. Amount paid: £55,000

• It was alleged that there were substantial deficiencies in the design of a software package, resulting in the system failing to meet the client’s requirements. Amount paid: £450,000.

If you have a question about insuring your technology business, whether you are a start-up or multinational organisation, please contact Scott Sayce, Head of Professions on 0118 9165 483 , or complete one of our enquiry forms.

Design and Build Professional Indemnity……what can go wrong!

05/03/2012 in Professional Indemnity Insurance

As mentioned in previous blogs, contractors do have an exposure to professional indemnity related claims – Examples of matters that can arise and cause significant claims are:

• Design failure – Contractors provided the client with a design and build service in respect of construction of a quarry conveyor belt, capable of carrying tonnes of material. The design of system was subcontracted out to specialists. After catastrophic failure of the conveyor belt machinery, substantial damage was caused. Although the claim was subrogated by PI insurers against specialist designers, the claim was settled against the Contractor for £42,000.

• Alleged specification failure – Major fire at Heathrow Terminal 1 emanating from a fast food restaurant caused multi-million pound damage. Insured, one of 13 defendants added as co-defendants by building insurers. One of many allegations involved the inadequate specification of extractor flue that allowed hot gasses to build. Although the contractor was involved in specification, the claim was successfully defended. Costs £50,000.

• Design failure – Temperature of new cold storage room at factory consistently too high because of inadequate design. Paid £250,000 plus costs.

• Inadequate design – Air extraction and temperature control at restaurant failed to work properly. Restaurant was closed pending repairs. Paid £150,000 plus costs.

• Structural design defect – Incorrect structural calculations contributed to total building failure of new car park. Paid £750,000 plus costs.

• Negligent project management – Contractor instructed in role of project managers on existing but uncompleted development, problem due to bankruptcy of original contractors. Project involved restarting development, i.e. putting it back on track, utilising previous designs but new professional team. Allegations of negligence concerning duplication of work carried out by original team and additional duplications between new team, Surveyors, Engineers and QS. This led to an over-run on the contract budget. Paid £26,500.

For help and advice about Professional Indemnity insurance please contact Scott Sayce, Head of Professions on 0118 9165 483, or complete one of our enquiry forms

Professional Indemnity…..Design and Build, the hidden exposures!

01/03/2012 in Professional Indemnity Insurance

Frequently contractors who offer no design services at all are being asked to carry professional indemnity. A question they often ask is “what risks do I face if I offer no professional services?” The answer is that there are some risks:

• Design alterations: any firm involved in building anything will nearly always need to ‘tweak’ the plans a little in order to make them work. You could call this ‘buildability’ and the problem is that a small alteration here could have a larger knock-on effect, on thus causing a real problem later in the job. A real liability can arise if plans are altered.

• Design checking services: often firms, formally or informally, double check designs to ensure they work. Failure to do so can lead to a claim.

• Temporary works: scaffolding, access roads, perimeter fencing, storage facilities are often part and parcel of a contract but are not designed and are left to the contractor. Such works can be expensive and can go wrong leading to further expense and consequential loss.

• Duty to warn: a duty to warn the client of any problems or errors that the contractor might become aware of is sometimes included in the contract. Failure to warn when one is aware could lead to a liability and a claim under a PI policy.

For help and advice about Professional Indemnity insurance please contact Scott Sayce, Head of Professions on 0118 9165 483, or complete one of our enquiry forms